How foreclosure delays impact mortgage defaults and mortgage modifications

Research output: Contribution to journalArticle

Abstract

The mortgage foreclosure process was prolonged after the financial crisis. I analyze its impact on mortgage defaults and post-foreclosure modifications. When a household fails to repay a mortgage, the delinquent household can stay in its home without paying rent or making a mortgage payment until the foreclosure process terminates, leading to an increase in defaults. My quantitative exercise shows that unexpected declines in house prices with foreclosure delays that mirror the financial crisis triple the mortgage delinquency rate, while it temporarily reducing the foreclosure rate by half. An increase in mortgage defaults motivates financial intermediaries to voluntarily modify loan terms after initiating the foreclosure process to mitigate their losses.

Original languageEnglish
Pages (from-to)18-37
Number of pages20
JournalJournal of Macroeconomics
Volume59
DOIs
Publication statusPublished - 2019 Mar

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Foreclosure
Mortgage default
Mortgages
Household
Financial crisis
Exercise
Financial intermediaries
House prices
Rent
Mortgage rates
Loans
Payment

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Cite this

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How foreclosure delays impact mortgage defaults and mortgage modifications. / Kim, Jiseob.

In: Journal of Macroeconomics, Vol. 59, 03.2019, p. 18-37.

Research output: Contribution to journalArticle

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